2008 June « Enterprising Investor Forum

Value in Ford (2) Thursday, June 12, 2008

Posted by ei-forum in US Traded Stocks.
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Following on from our previous post – Value in Ford: here - we think that the time has come for the long-term investor to open a position under 6 USD.

This could be a first third with the aim of adding to your position should we see 52 week lows again but the bottom line is that Ford is trading at -at least – a 30% discount to long-term value.

The reorganization is on track and despite higher fuel prices, Ford is on the right path. It’s strong international business will continue to allow them to off-set the slow US business and their strength in smaller segments and diesel outside the US will be an incredible asset should they need to go down that road in the home market.

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Succession planning at Apple? Wednesday, June 11, 2008

Posted by ei-forum in US Traded Stocks.
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There has been a lot of talk surrounding Steve Job’s health following the recent iPhone presentation where he did appear to have lost a lot of weight.

We hope he is doing fine and that this is all just speculation, but here is an interesting video on the subject that raises some valid succession planning issues that Apple will have to deal with sooner or later.

Enjoy!

Short selling, short interest and more… Tuesday, June 10, 2008

Posted by ei-forum in Miscellaneous.
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We’ve had a couple of emails from readers asking us about ‘short selling’ and ‘short interest’. Whilst, strictly speaking, this is not really one of our recommended strategies, here goes some info on the topic:

Short Selling: this means that you sell a stock, commodity etc, that you do not own. In order to sell it, you have to borrow it from someone else with the obligation of giving it back – by buying it back on the open market. One would sell short is he/she thinks that the price will fall, thereby meaning that you would buy it back at a lower price than what you paid for it. Your profit would be the difference, basically the opposite of going long! Please remember that when you buy a stock, if it goes to zero you would lose 100% of your investment. However, if you short a stock, there is no limit to how high it can go before you manage to buy it back and you could end up losing more that your initial investment.

Short Interest: the total number of shares that have been sold short. Usually, it is showed as a percentage. For example, 5% short interest means that 5% of the outstanding shares are held short.

Days to Cover: based on the average daily volume of a share, it indicates how many days it would take all the shorts to buy back the shares they need to give back. For example, if a company has a daily volume of 5 million shares, and 10 millions share sold short, then it would take the shorts 2 days to cover.
Short Squeeze: when prospects for a stock change for the positive and the price start to rise and investors who sold short need to close their short positions. This rush to buy back the shares, in order to cut losses, will force the share price higher very quickly.

This is the link to an good and more extensive video summary of the above:

http://youtube.com/watch?v=sj5EKg80yKQ

Enjoy!

Driving Force Behind Wall Street Monday, June 9, 2008

Posted by ei-forum in Investing Humor.
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We saw this and immediately thought that it would be great for of Monday ‘Investing Humor’ post.

Come back next Monday for more investing humor!

Investing is not a game Friday, June 6, 2008

Posted by ei-forum in Rants.
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Time for a little rant. Ok, the e*trade video is nothing new and actually quite amusing but what kind of a message is it sending out? No wonder the average ‘person’ and note we are not calling them investors gets killed in the markets!

All these companies keep on promoting how easy it is to buy stocks and people end up thinking that they are investing instead of just gambling!

E*Trade video link: here.

If the average fund manager doesn’t manage to beat the street what are the chances someone signing up to e*trade after seeing this commercial will? But then again, since financial institutions make their money on activity, no one cares what the outcome is!

Enjoy the weekend.

Value Investing with Bill Miller Thursday, June 5, 2008

Posted by ei-forum in Investing.
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Bill Miller of the Legg Mason Value Trust has an eviable record, he has beaten the S&P for 15 consecutive years. His value investment style borrows from the greats and he is also knwo for some of his classic quotes:

“How do I know when I’m wrong? When I can no longer get a quote.”
“I often remind our analysts that 100% of the information you have about a company represents the past, and 100% of a stock’s valuation depends on the future.”
“The market does reflect the available information, as the professors tell us. But just as the funhouse mirrors don’t always accurately reflect your weight, the markets don’t always accurately reflect that information. Usually they are too pessimistic when it’s bad, and too optimistic when it’s good.”

Here is an interesting interview from Morningstar with the master himself where he talks about how he got interested in the market and why technology stocks can be valued:

Enjoy!

Investing in REITs Wednesday, June 4, 2008

Posted by ei-forum in ETFs.
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Vanguard With the market heading towards another pull back, the Enterprising Investor should be looking to take advantage of this volatility in order to secure superior long-term returns.

With a current yield of over 5% the Vanguard SF REIT ETF (VNQ) looks pretty interesting to us and a move back into the low 60s would definitely represent a good buying opportunity.

The investment seeks income and moderate long-term capital growth. The fund normally invests at least 98% of assets in stocks of real estate investment trusts (REITs) that are included in the Morgan Stanley REIT index.

This is a great and cost efficient way for investors seeking real estate exposure in their portfolio but that want to limit extreme volatility or the complete loss of capital that could come with picking individual REIT at this specific moment in time.

We all know, that the credit crunch is placing a lot of stress on housing markets but long-term, private and especially, commercial real-estate will continue to appreciate in value and offer good returns to patient investors.

Please read our disclaimer.